by Property Alcaidesa 
Will the property market in Spain rise? The top 12 predictions for the Spanish housing market in 2021 coronavirus (Covid-19) updated. Only data and graphs from official resources.
Spanish property up in 2021 after the coronavirus (Covid-19)?
The Spanish property market has fallen to a standstill situation, like the rest of the economy in most European countries, although it is expected to resume activity during 2021, with the arrival of vaccinations in the country.
The recovery will be due to domestic demand by Spanish nationals and the holiday property market by European citizens.
Regarding domestic demand, the APCE (Association of Promoters and Constructors in Spain) has already put forward a demand to the Government, together with other incentives, for the reduction of VAT on newly built property from an average 10% in most areas to 4%.
This could be one of the extraordinary measures that are now being implemented by the Spanish Government, to prevent that all new housing promotions suffer the consequences of a long term crisis.
VAT is applied to the property so the reduction would benefit all buyers, regarding their nationality.
The general optimistic belief between promoters is that Covid-19 effects on the newly built property market would only be a delay in launching new promotions, but they don´t foresee significant reductions on the price.
The foreign holiday property market might be subject to high and low fluctuations as the crisis progresses during this year, once the movement restrictions are lifted.
Real Estate Agents are finding new innovative ways to keep customers interested and be ready to attract three types of customers, in an ideal scenario of a sudden rush in the property market:
- Buyers and Sellers being kept on hold now, by the complete shut down of the economy, will want to exchange contracts as quickly as possible before next Autumn and the predictable return of coronavirus during the winter months.
- Investors with substantial cash amounts, who are already suffering losses in other financial investments, will quickly move to the property market as the safest place to keep money during times of economic uncertainty.
- Bargain hunters expecting to find special reductions on prices in some areas, as new properties add up to the ones already for sale prior to the coronavirus crisis, creating an excessive offer and the subsequent discounts.
Is the Spanish property market improving in 2021?
Demand in the Spanish housing market will improve in 2021, and there is data that backs this up.
S&P expects house prices in Spain to rise as early as 2021. According to American credit rating agency Standard & Poor’s (S&P), an average of about 25% of household income has been saved in the Euro zone.
If the delayed demand for housing is caught up in 2021, more savings will be available to buy housing and house prices will rise as a result, according to the credit rating agency.
A good indicator of the evolution of the property market in Spain can be seen in the data showing the price per square meter. This data can be used to forecast and predict the path of the Spanish housing market.
Why will the property market in Spain go up in 2021?
There has been a slight upward movement after 11 months.
Prices for existing houses rose again for the first time in November 2020 after 11 months of declines. It is admittedly a small initial increase (0.7%) in the house price that was measured in November of this year. But it puts an end to a string of 11-month straight declines since December 2019.
In Spain, twelve autonomous regions presented positive monthly data in November 2020. Four of those 12 regions showed an increase of more than 1%: Catalonia (2.8%), Aragón (2.1%), Extremadura (1.8%), La Rioja (1.1%).In Spain, twelve autonomous regions presented positive monthly data in November 2020. Four of those 12 regions showed an increase of more than 1%:
- Catalonia (2.8%)
- Aragón (2.1%)
- Extremadura (1.8%)
- La Rioja (1.1%)
There were still 4 autonomous regions where the price of housing fell in November:
- Castilla-La Mancha (-2.7%)
- Navarre (-2.5%)
- Madrid (-0.6%)
- Canarias (-0, 4%)
- País Vasco (-0.4%).
Catching up of demand for housing delayed in 2020
During the pandemic, the housing market was unable to function normally. There was a demand for housing, but buying was postponed. The demand for housing has therefore gone unnoticed.
Extra financial resources
Due to restrictions on freedom of movement, much less money was spent in 2020, while incomes remained largely unchanged. As a result, money has been saved and homebuyers have more resources. These extra financial resources are the foundation for the expectation that we can expect to catch up in deferred home purchases in 2021.
Very low financing costs
In addition, the financing costs are low. Interest rates are at an all-time low. However, the banks have tightened credit conditions since the start of the pandemic. But most households have less debt than during the time of the financial crisis (2008-2013). The solvency of home buyers is much better. In combination with the low interest rate, many loans for the purchase of a home will be granted in 2021.
Much stronger foundations
No comparison can be made with the property crisis that started in 2008 and lasted for 5 years, so that there was only a revival in the Spanish housing market at the end of 2013. The fundamentals under the Spanish property market are much stronger than during the property crisis of 2008. The economic situation is also more solid. The Spanish housing market will therefore return to the picture of early 2020 in the short term, provided that the development of the pandemic continues to decline without another wave.
Expected change of housing preference in 2021
The preferences and needs of homebuyers have changed over the period of compulsory home stay. Larger houses with gardens located in outlying areas and apartments with large terraces will increase in value.The housing market moves slowly, it does not change overnight. But there are many home seekers who want this type of housing. This trend is expected to continue in 2021.
How are the prices expected to develop in 2021?
The year 2020 is expected to end with a decrease of 5% on average across Spain. For the year 2021, I expect an average across Spain to be a step ahead.
Where should I buy a house in Spain in 2021?
A small gain is to be expected in areas where foreign home buyers account for a large part of the market. A small decrease is expected in the interior, mainly in the market for small existing homes.
The price development will be very different depending on where the house is located.
The tourist areas
Many international home buyers have postponed buying a home in Spain due to travel restrictions from abroad. In 2021 there will be some catching up for buying a house in Spain. This will mainly be seen in the tourist areas on the Spanish coasts. The expected price increase in these areas is around 2.3% for the year 2021
For the Spanish market
Spanish homebuyers who have the financial scope to do so, have started to look for larger homes in the countryside. After the months of compulsory stay at home and the rise of teleworking, the demand for homes that meet this requirement is growing. This additional demand is expected to cause a price increase for these types of homes.
Around the big cities
In contrast to the previous crisis, house prices in the core areas of the major Spanish cities have fallen this time. In 2020 that decrease has increased to -10%. The explanation for this is that the pandemic has reduced interest in buying in the city centres of these large cities. Interest has shifted to the surrounding more spacious outdoor areas.
Is the Spanish economy improving in 2021?
The Spanish Government predicts a 7.2% rebound of GDP next year following a fall of 11.2% in 2020 due to the pandemic global crisis, in line with the Bank of Spain projected growth of 5% in 2021 and 4% in 2022.
Due to european coronavirus funds this increase could even be higher with more than 25 billion euros initially injected in the Spanish economy, rising GDP to 9.8% in 2021. Thanks to this extra money 2021will benefit from high government spending of 54% to around 196 billion euros.
Are construction trends affecting the property market in Spain?
A fall in prices can be expected for existing homes in the areas where mainly Spanish buyers can be found.
Prices for new construction in those areas remain the same. The new-build houses that will be completed in 2021 have for the most part already been purchased in 2020. In addition, Spanish construction companies are currently in a very healthy position and do not need to cut prices.
The construction sector is recovering after years of hardly any activity, building permits experimenting an increase of 9% in 2019 and new developments are attracting money from investors globally, specially Rusia and China, who account for 60% of the Golden Visa applications, since it was introduced in 2013.
Do you know all the Spanish Property Taxes? Learn all about them in this ‘easy to read’ article
Should you invest in the Spanish housing market in 2020?
The Spanish property market will continue to be one of the most interesting assets for investors, in spite of the current pandemic crisis because of the housing price fall in the coming months and the accumulation of property stock in the market.
Central banks around the world will favour special financial conditions while inflation remains low, due to lack of consumer expenditure. Therefore, Euribor in the eurozone will stay at negative values around -0.55% in the foreseeable future.
Check the Official Euribor website for live updates and up to date information.
Worried about investing in Spain after Brexit? Check our full guide and find the answer to all your questions.
Who will buy property in Spain in 2021?
House buyers from the Northern European countries, in particular, are waiting to buy. There is clear interest from buyers, but prospective buyers are currently being held back by additional health checks that they must meet in order to enter Spain due to the coronavirus (COVID19) situation.
Lower economic growth is expected within Europe. Although Spanish economic growth is still above the European average, this will not cause extreme price increases in the Spanish housing market. Especially on the Spanish coasts, foreign home buyers are still the ones who account for a large part of the market.
Foreign buyers account for 18% of total sales in 2018.
Britons (14%) are the main buyers, because they settle in Spain after early retirement or as regular holidaymakers with a property to enjoy all year round. Although the British market has been holding back waiting for the final exit from the European Union, the last election strong majority seems to be giving the so much needed confidence to the financial markets, as the rise in the pound showed immediately after the election result. Buying a property in Spain after Brexit is becoming a realistic opportunity.
Property Registrars numbers show an important growth in properties purchased in Spain by other european citizens like Scandinavians, Dutch, French and Germans.
Should you rent your property in Spain?
Rental yields were very interesting as 35% of the 82 million tourists visiting Spain in 2019 were using private accommodation, according to the Ministry of Tourism.
The tourist sector remains expectant to how the coronavirus pandemic will develop with the arrival of vaccinations in 2021. The tourist rental accommodation could still be a good source of income for those familiar with holiday rental platforms, such as Airbnb.
Source https://www.housesinspain.com/blog-en/trends-en/spanish-property-market-2020
